Carbon tax just another cost - so get used to it

Elizabeth Knight

One of the business community's favourite expressions is that they like certainty. In a carbon sense, they now have it. It was well within the rights of business to fight against the carbon tax; like any other tax, it is a cost they would rather avoid.

For companies, particularly large ones, managing costs is one reason shareholders agree to executives' big pay packets. Another is to allocate capital in the most cost-effective way for the greatest return. A third is to find new revenue sources as the business, economic and technological environment changes.

Adaptation is a vital part of managing change and, like it or not, management is being asked to step up and play it smart.

The level of preparation for this change will become a measure of management competence.

For years, companies have been testing their own level of emissions. Business understands how to reduce its cost of compliance during the first five transitional years - it's aware of all the ways to procure offsets.

The big emitters have been given a generous 95 per cent off to start with. And within three years, when the carbon price moves from fixed to floating, emitters can buy 50 per cent of their carbon credits in the international market.

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The director of emissions and environment at Westpac, Emma Herd, describes carbon as a bit like a currency. Each country has a different carbon currency and Australia will soon join the ranks.

Most can also trade in the international carbon currency, the CER.

And, like currencies, floating carbon prices fluctuate depending on demand. Thanks to the economic malaise in Europe right now, emissions are lower and demand for carbon credits has fallen, and in turn so has the price, which is now about $10 per tonne.

In this sense, a traded carbon price has a built-in hedging mechanism.

Industry groups such as the Business Council of Australia have a real problem with the fixed-price regime the carbon scheme will have for the first few years. In theory this is understandable but the big emitters are being compensated for the fact that this is an impost their offshore competitors don't have to wear.

''It is extremely disappointing that the Parliament has not heeded the council's calls to include essential safeguards in the legislation and act in Australia's national economic interest,'' the council says.

''The council's analysis has demonstrated the legislation is based on optimistic assumptions in the Treasury modelling that have not been stress tested.''

Business has fought a valiant fight and rightly claims this deal was done by a government to appease the Greens on whom it relies to govern.

But now that it is done, business will need to get used to factoring in a carbon price in the same way they have to deal with other cost issues such as labour, raw materials, the currency and the demand for their goods and services.

There has been plenty of time - the prospect of the carbon tax has been on the agenda for nearly 10 years.

The only additional variable that needs to be factored into the equation is Tony Abbott and his promise to get rid of the carbon scheme. Abbott's policy response is the hardest issue to model.

Meanwhile, if New Zealand's history of a carbon tax is any guide, businesses will deal first with the low-hanging fruit - fuel switching and energy efficiency.

Ultimately, they will need to make longer term decisions about investment and capital expenditure in cleaner energy based on the returns.

This is the whole point of the tax on the environment.

And none of this even touches on the positive aspects, such as the opportunity for enterprising companies to make money out of investing in new technologies.

Whole industries will be created around finding and selling cleaner ways to do business.

For the bulk of the population, the carbon tax will be more than mitigated by government concessions.

Herd says for the most part Westpac's business customers have made preparations well in hand for the carbon tax. That is not to say they are happy about it or deny it will be an additional cost, but some at least are a long way down the track to sorting out a response that would best minimise the impact.

A

pparently the standards of mobile-phone advertisements are improving. But the rate of improvement is not fast enough.

The Federal Court has found against yet another telecoms company, this time TPG, for misleading customers with ads about the cost of broadband services.

Justice Bernard Murphy found the advertisements showed consumers could buy the broadband service for $29.99 per month without acquiring any additional service or paying any extra monthly charge. But the real price was higher because the ADSL2+ was only available in conjunction with home line rental from TPG at an additional cost of $30 per month.

In his judgment, Justice Murphy said ''it is an unfair trade practice to require consumers to find their way through to the truth past advertising stratagems which have the effect of misleading or being likely to mislead them''.

TPG is not alone. This has been a focus for the Australian Competition and Consumer Commission for a couple of years.

In July, Optus was ordered to pay $5.26 million, a penalty it is appealing. TPG is now awaiting a penalties hearing following its adverse judgment.

The courts are sending a very clear message to telcos, and one that was nicely summed up by Justice Nye Perram in the Optus case. ''Such a penalty will operate as an appropriate deterrent not only to Optus but to other traders who might be tempted by the thought that misleading advertising is a profitable strategy.''